ACC507 – COST AND MANAGEMENT ACCOUNTING

Standard Costing and Variance

Analysis
 ACC507 – COST AND MANAGEMENT ACCOUNTING

Material
Variances

2.) Material 3.) Material

1.) Material
Price Quantity
Cost Variance
Variance Variance

(SQ*SP) – (SP – AP) * (SQ – AQ) *

(AQ*AP) AQ SP
 ACC507 – COST AND MANAGEMENT ACCOUNTING

Activity – I
The ‘standard’ and Actual Material Costs’ incurred in the manufacturing
process is given below:
Material (Standard) Material (Actual)
Quantity Price Quantity Price
(A) (B) (A) (B)
50 Litres of $14 60 Litres of Palm $16
Palm Oil & fat Oil & fat

Calculate the following variances of ‘Yardley’ soap:

a) Material cost variance
b) Material price variance
c) Material quantity variance
 ACC507 – COST AND MANAGEMENT ACCOUNTING

Labor
Variances

2.) Labour
1.) Labour 3.) Labour
Efficiency
Cost Variance Rate Variance
Variance

(ST*SR) – (ST – AT) * (SR – AR) *

(AT*AR) SR AT
 ACC507 – COST AND MANAGEMENT ACCOUNTING

Activity – II
The ‘standard’ and Actual labor Costs’ incurred in the manufacturing process
is given below:
Labor (Standard) Labor (Actual)
Time Rate Time Rate
10 hours $25/hour 16 hours $30/hour

Calculate the following variances of ‘Covid’ masks:

a) Labor Cost variance
b) Labor Efficiency variance
c) Labor Rate variance
 ACC507 – COST AND MANAGEMENT ACCOUNTING

Calculating Material Mix Variance

A.)
Material Mix Variance Standard Price* (SQ
(When Total Output is – AQ)
same)

B.) Standard Price *

If SQ is revised due to (Revised SQ – AQ)
shortage of Material
 ACC507 – COST AND MANAGEMENT ACCOUNTING

1.) Calculating Material Mix Variance for ITC Classmate Notebook

• Following information is given related to ITC’ related to manufacturing

of Classmate notebook.

Materials Standard Standard Actual Actual

Quantity Price/unit Quantity Price/unit

Fiber 40 10 50 12
Pulp 60 5 50 8

• You are required to calculate the ‘Material Mix Variance’.

 ACC507 – COST AND MANAGEMENT ACCOUNTING

2.) Calculating Material Mix Variance for ‘ACC Cements’

• Following information is given related to ACC Cements related to

production of one bag of cement.
Materials Standard Standard Actual Actual
Quantity Price/unit Quantity Price/unit
Limestone 50 2 60 2.25

Clay 100 1.20 90 1.75

• Due to shortage of ‘limestone’, the use of limestone was reduced by

10% and that of Clay was increased by 5%.

• You are required to calculate the Material Mix Variance

 ACC507 – COST AND MANAGEMENT ACCOUNTING

Calculating Labor Mix Variance

A.) (Revised Standard

Labor Mix Variance Hours – Actual Hours)
Calculation Formula * Actual Rate

Calculation of
Standard Hours of grade *Total Actual Hours
Revised Standard
Hours Total Standard Hours
 ACC507 – COST AND MANAGEMENT ACCOUNTING

3.) Calculating Labor Mix Variance for ‘ACC Cements’

• Following information is given related to ACC Cements related to production of

one bag of cement.
Grade of Standard for 100 Cement bags Actual for 100 Cement bags
workers
Standard Standard Amount Actual Actual Amount
Hours Rate Hours Rate
Skilled 3000 2 6000 3200 1.5 4800
Unskilled 2000 3 6000 1900 4 7600
Total 5000 12000 5100 12400

• You are required to calculate the Labor Mix Variance